Category: Turkiye

The Labor Courts Code (the “Code”) was published in the Official Gazette on October 25, 2017 and entered into force. The Law abolished the Law No. 5521 on Labor Courts (“Abolished Law”) and brought numerous amendments.

What Changes Does the Code Bring?

1. Mediation as a Pre-Condition to a Lawsuit

Starting from January 1, 2018, it is a must to apply to mediation before filing a lawsuit concerning employee or employer receivables and compensation (statutory seniority compensation, notice compensation, overtime pay etc.), and reinstatement claims. The mandatory mediation requirement is, however, not applicable to pecuniary and non-pecuniary compensation lawsuits arising out of workplace accidents or occupational diseases and their related recourse lawsuits. Lawsuits that are filed without its parties first undergoing mediation will be dismissed on procedural grounds due to the lack of cause of action.

The mediator must conclude the mediation within three weeks. In case the circumstances so require, this term can be extended for a maximum of one week.

If the parties reach a consensus at the end of the mediation, they cannot file a lawsuit regarding the issues agreed to in the mediation meetings. If, on the other hand, the parties cannot reach a consensus at the end of the mediation, the plaintiff can file a lawsuit.

2. Unappealable Decisions and Amendments in Challenging Court Decisions

As a result of these amendments, starting from October 25, 2017, certain court of first instance decisions, for example, decisions on reinstatement lawsuits, cannot be appealed with the Appellate Court; the parties will be able to only challenge these decisions before the Regional Courts of Justice.

The eight days’ period foreseen in the Abolished Law to challenge court decisions has been abolished, and accordingly, the periods set forth in the Civil Procedural Law no. 6100 will apply in terms of challenging court decisions.

Consequently, the period to apply to the Regional Court of Justice will be two weeks and will start to run as of the written communication of the court decision to the parties. The period to apply for an appeal will also be two weeks and will start to run as of the written communication of the Regional Court of Justice’s decision to the parties.

3. Statute of Limitations

The Code lowered the statute of limitations for certain receivables from ten years to five years, if they arise out of employment agreement. In this regard, the below statute of limitations of the below items are determined to be five years:

• Annual paid leave,
• Statutory seniority compensation,
• Notice compensation,
• Bad faith compensation, and 
• Compensation arising out of termination that does not comply with the equal treatment principle.

Conclusion

The Code introduces a number of significant changes to the labor legislation, such as mandatory mediation, unappealable decisions and lower statute of limitations for certain employee receivables. The changes aim to diminish the workload of labor courts and also the workload of the Appellate Court in relation to labor disputes.

By Sertac Kokenek, Senior Assocate, and Elif Nur Cakır, Associate, Baker McKenzie Turkey

Overall, this was a less active year in terms of Foreign Corrupt Practices Act (“FCPA”) enforcement actions, at least when compared to 2016. In 2017, the Department of Justice (“DOJ”) took a total of 9 enforcement actions and the Securities and Exchange Commission (“SEC”) took a total of 7 enforcement actions. Therefore, we observe that the DOJ has been more active than the SEC in terms of the number of enforcement actions this year. So far in 2017, we have witnessed only 2 declinations within the scope of the Pilot Program,¹ as opposed to 5 declination decisions in 2016. 

Of the 9 enforcement actions taken by the DOJ, 5 of them were related to real persons. 2 individuals were charged with offenses within the scope of the 7 SEC enforcement actions. 

2017 marks another year in which enforcement actions against individuals were lower in number than the enforcement actions taken against corporations. The Yates Memo, which was published on 2015, underlined the significance of individual accountability for deterring corporate wrongdoing, and provided guidelines as to how to enforce and ensure such accountability. Nevertheless, the total number of FCPA enforcement actions taken against individuals so far is 7, as opposed to 12 enforcement actions brought against corporations.

DOJ Declination Decisions

In June 2017, the DOJ closed its investigation with regard to Linde North America, Inc., and Linde Gas North America, LLC (collectively known as “Linde”). According to the DOJ, Spectra Gases, Inc. (“Spectra”), a company that Linde acquired in 2006, bribed foreign public officials in the Republic of Georgia between 2006 and 2009, in relation to Spectra’s transactions with the National High Technology Center (“NHTC”), a state-owned and state-controlled entity in Georgia. The DOJ records indicate that three high-level executives of Spectra entered into an arrangement with NHTC officials and a third-party intermediary, whereby the parties would share the profits of income-producing products sold by NHTC to Spectra. Throughout the course of this scheme, Spectra entered into an agreement with a company established by NHTC officials, which allegedly provided consultancy services to Spectra, and, in return, received a certain amount of profit from the transaction in question. After Linde learned of the corrupt arrangement, it withheld the $10 million payment due to Spectra executives, and refused to make any further payments that were due to the companies controlled by NHTC officials. The DOJ’s declination decision was based on this withholding of payments (which was viewed and categorized as a remediation step), Linde’s timely and voluntary disclosure, full cooperation, its termination of the employees and business partners who had taken part in the corrupt arrangement, and the fact that it had agreed to disgorge any profits it had received due to the corrupt arrangement, among others.

In June 2017, the DOJ closed its investigation with regard to CDM Smith, Inc. (“CDM”), a Boston-based engineering and construction firm. According to the DOJ, CDM and its subsidiary in India had paid approximately $1.18 million in bribes to Indian government officials through various employees and agents, in order to secure construction contracts. The bribes, which were funneled through subcontractors, were generally in the range of 2-4% of the contract price. The subcontractors provided no actual services and they were aware that the payments were being made for the benefit of public officials. All members of the senior management of CDM India had taken part in this scheme. Among others, the DOJ’s declination decision was based on CDM’s timely and voluntary self-disclosure, its full cooperation, its comprehensive investigation of the matter, and the fact that it had agreed to disgorge profits resulting from the scheme.

DOJ Enforcement Actions

In January and October 2017, three individuals (Juan Jose Hernandez Comerma, Charles Quintard Beech III, and Fernando Ardila Rueada), who were all owners or partial owners of energy companies, pleaded guilty to a bribery scheme related to Venezuela’s state-owned and state-controlled energy company, Petroleos de Venezuela S.A. (“PDVSA”). According to their statements and admissions, all three had paid bribes so that their company could enter into contracts with PDVSA. Public officials had been entertained based on the contracts that had been awarded thanks to the actions and decisions of the relevant officials. Beech also admitted that he had conspired to hide the nature of the corrupt payments through various financial schemes and transactions.

In January 2017, Zimmer Biomet Holdings, Inc. (“Biomet”), a medical device manufacturing company, agreed to pay a $17.4 million penalty to the DOJ, and more than $13 million to the SEC, for having violated the deferred prosecution agreement (“DPA”) that it had entered into in 2012. According to the SEC and the DOJ, Biomet continued to do business with a prohibited distributor in Brazil, which was notorious for its corruption and bribed a Mexican customs official via a customs broker. Biomet was deemed not to have established adequate internal control systems, as red flags suggesting bribery were continuously ignored.  

In January 2017, a Chilean-based chemical and mining company called Sociedad Quimica y Minera de Chile S.A. (“SQM”) agreed to pay a $15 million penalty to settle the SEC’s charges and a $15.5 million penalty as part of a deferred prosecution agreement with the DOJ. According to the company’s admissions, SQM had made donations to numerous foundations affiliated with Chilean politicians. For example, SQM paid around $630,000 to a foundation controlled by a Chilean official who had influence over a key part of SQM’s business in Chile. Furthermore, SQM hid these payments under the guise of payments for consulting and professional services, which it never received.

In January 2017, Las Vegas Sands Corp. (“Sands”), a Nevada-based gaming and resort company, entered into a non-prosecution agreement (“NPA”) with the DOJ, and agreed to pay a fine of nearly $7 million for its FCPA violations. According to the company’s admissions, Sands knowingly and willfully failed to implement an internal controls system in order to ensure that the company books and records were complete and accurate. Sands paid approximately $5.8 million to a business consultant without any apparent legitimate business purpose. In fact, the consultant was a former official of People’s Republic of China (“PRC”) and had offered its assistance to Sands based primarily on the qualification that it had political connections with PRC officials. Sands did not carry out any enhanced due diligence regarding the consultant or its dubious business practices, despite the numerous red flags. An employee of the finance department, along with an outside auditor, had warned the company that some of the payments made to the consultant could not be accounted for. Sands terminated the finance-department employee who had raised this issue. In 2016, Sands had paid $9 million to the SEC in a parallel investigation.

In July 2017, Amadeus Richers, the former general manager of an American telecommunications company, pleaded guilty to the charge of conspiring to violate the FCPA. According to his admission, Richers (along with his co-conspirators) had paid about $3 million to Haitian government officials in order to obtain business in relation to Telecommunications D’Haiti, the state-owned and state-controlled telecommunications company in Haiti. Some of the bribes had been paid through third-party intermediaries, and others had been paid directly to officials or to the relatives of those officials. Richers, a German citizen living in Brazil, was sentenced to time served, 3 years of supervisory release, and also ordered to pay a criminal monetary penalty of $100.

In September 2017, a Swedish telecommunications company, Telia Company AB (“Telia”), entered into a global settlement with the SEC, the DOJ and the Dutch and Swedish law enforcement agencies. Telia and its Uzbek subsidiary, Coscom LLC (“Coscom”), agreed to pay a total penalty of more than $965 million to resolve charges with regard to a bribery scheme in Uzbekistan. According to the records of the SEC and the DOJ, Telia and Coscom had bribed an Uzbek government official in the amount of at least $331 million. According to the SEC, Telia paid the bribes to a shell company, which was controlled by a family member of the Uzbek president, in the guise of payments for lobbying and consulting services, which were never obtained. The penalty payment of $965 million may be offset by the fines paid to Swedish and Dutch authorities.

In October 2017, Joseph Baptiste, a retired U.S. Army Colonel, was charged in an indictment for allegedly taking part in a foreign bribery and money laundering scheme with regard to an $84 million port-development project in Haiti. Mr. Baptiste allegedly solicited bribes from undercover FBI agents, who were acting as potential investors. Mr. Baptiste allegedly told the agents that the payment would be made to Haiti officials through a non-profit that he controlled. Mr. Baptiste allegedly took approximately $50,000 from the agents for the bribes, and used the money for his personal dealings, but he allegedly also intended to receive more money for the bribes.

SEC Enforcement Actions

In January 2017, Mondelez International, Inc., a US-based food beverage and snack manufacturer, along with its subsidiary, Cadbury Limited (“Cadbury”), agreed to pay a $13 million civil penalty to settle SEC charges with regard to the violation of the internal controls and books-and-records provisions of the FCPA. According to the SEC, Mondelez acquired Cadbury and its subsidiaries, including Cadbury India Limited (“Cadbury India”), in February 2010. Subsequently, Cadbury India hired an agent in order to obtain licenses and approvals for a factory in India. However, it did not conduct appropriate due diligence or sufficiently monitor the agent. After receiving payments from Cadbury India Limited, the agent withdrew most of the money (a total of $90,666) from the account in cash. According to the SEC, Cadbury India failed to keep accurate books and records with regards to the agent’s purported services, and Cadbury failed to implement adequate controls regarding its subsidiary, Cadbury India.

In January 2017, Orthofix International (“Orthofix”), a Texas-based medical device company, agreed to admit wrongdoing and pay a fine of more than $14 million to the SEC. The settlement relates to two offenses: The SEC found that Orthofix had booked certain revenues improperly and had made payments to doctors who worked in a state-controlled hospital in Brazil in order to boost its sales. In addition, four former executives also agreed to pay penalties in cases that were related to the accounting violation. According to the SEC, Orthofix used high discounts, third parties and fake invoices in order to lure the doctors into using the company’s products.

In January 2017, Michael L. Cohen, the former head of Och-Ziff Capital Management Group’s (“Och-Ziff”) European office, and Vanja Baros, a former executive of Och-Ziff who worked on deals related to Africa, were charged with violating the FCPA and the Securities Exchange Act, and with aiding and abetting Och-Ziff’s violations. According to the SEC, the former executives allegedly orchestrated a bribery scheme worth millions of dollars involving high-level government officials in Africa, which resulted in an investment by the Libyan Investment Authority (Libya’s sovereign wealth fund) in funds that were managed by Och-Ziff. They also allegedly attempted to pay bribes to government officials in Chad, Niger, Guinea, and the Democratic Republic of the Congo, in order to secure mining deals. Och-Ziff and two other executives had already settled the charges brought against them in 2016.

In July 2017, Halliburton, an American oil field services company, agreed to pay the SEC more than $29.2 million in order to settle the charges brought by the SEC with regard to the selection and payment processes of a local company with close ties to Angolan public officials, with the goal of winning oil field services contracts from the government. According to the SEC, the company outsourced its business to a local company whose owner was a former Halliburton employee and who also happened to be the friend and neighbor of the Sonangol official who would award the contracts. According to the SEC, the company entered into a relationship with this company not because of the work that the local company would carry out on its behalf, but solely in order to meet the local content regulations. The company’s former vice president Jeannot Lorenz, also agreed to pay a $75,000 penalty to the SEC in relation to the same investigation.²

(First published in Mondaq on November 22, 2017)

1. The pilot program provides companies with the opportunity to receive declination decisions, in case these companies meet the conditions put forth in “The Fraud Section’s Foreign Corrupt Practices Act Enforcement Plan and Guidance.”
2. Information regarding the cases mentioned in this section has been obtained from the official SEC (https://www.sec.gov/spotlight/fcpa/fcpa-cases.shtml) and DOJ (https://www.justice.gov/criminal-fraud/case/related-enforcement-actions/2017) websites.

By Gonenc Gurkaynak, Managing Partner, C. Olgu Kama, Partner, and Burcu Ergun, Associate, ELIG, Attorneys-at-Law

The Competition Board recently published its reasoned decision on the Tyre Industrialist Association’s application for an exemption for its Waste Management Strategies and Implementation Plan for Worn-out Tyres 2016 to 2020.

Worn-out Tyre Control Regulation

Pursuant to the Worn-out Tyre Control Regulation (dated November 26 2006 and numbered 26,357) – which is based on the principle of manufacturer liability – tyre importers and manufacturers must collect, recycle and dispose of worn-out tyres within the framework determined by the regulation.

The regulation indicates that manufacturers must inform the Ministry of Environment and Urbanisation on an annual basis of the tyre tonnage that they introduced to the market in the previous year under the scope of the quota application provision. In order to fulfil these obligations, manufacturers must establish their own waste management system or participate in an established waste management system.

In line with the principle of manufacturer liability under the Worn-out Tyres Control Regulation, Brisa Bridgestone Sabancı Lastik Sanayi ve Ticaret AŞ, Otomotiv Lastikleri Tevzii AŞ, Goodyear Lastikleri AŞ, Michelin Lastikleri AŞ, Türk Pirelli Lastikleri AŞ and Petlas Lastik San ve Tic AŞ established the Tyre Industrialists Association to collect, recycle and dispose of worn-out tyres for sellers, service providers, mechanics and similar organisations.

Waste management plan

Article 12 of the association’s waste management plan designates certain collection regions within Turkey in which multiple collectors can operate. Under the plan’s proposals, the association will arrange tenders to choose the contractor that will conduct the collection, transportation and temporary storage of worn-out tyres in the relevant region.

The financial resources of the proposed waste management system will be provided by:

• a contribution share collected by consumers under the polluter pays principle;
• worn-out tyre collection and supply service sales conducted by users under the prices determined by free market conditions; and
• reimbursements made by association members for organisation, training, publicity and awareness-raising event expenses.

In order to ensure that users contribute to the waste management plan’s costs under the polluter pays principle, a recovery contribution share will be collected for each tyre sold to real persons and legal entities. Recovery contribution shares will be determined by the Tyre Industrialist Association according to the annual cost of collecting worn-out tyres and may be subject to quota increases, inflation costs and variations in oil prices.

The Tyre Industrialist Association’s waste management plan emphasises that members will determine their own tyre prices and will not exchange information regarding new tyre prices with the association or its members at any stage.

Assessment of waste management system

As regards the Tyre Industrialist Association’s structure, the Competition Board’s assessment emphasised that:

• the association accepts membership under Article 5 of its Association Regulation; and
• there are no provisions setting out different conditions for undertakings under said regulation.

In addition, the board determined that members are free to revoke their membership at any point.

The board indicated that in order to ensure competition in the waste management market, multiple waste management systems should be established and manufacturers should not be forced to participate in one single system. Therefore, manufacturers should be able to use different waste management systems for the different types of waste product which they are required to collect.

In its assessment of the case file, the board found that Tyre Industrialist Association members can easily revoke their membership and there are no provisions obliging undertakings to provide their waste products solely to the association. In this regard, the board found that tyre manufacturers can collect their waste products through agreements with other waste management systems.

Assessment of collection activities

The board found that the most significant difference between the Tyre Industrialist Association’s 2016 waste management plan and its 2010 waste management plan were:

• exclusivity in favour of the collector and restrictions on the collectors’ marketing rights (Decision 10-67/1422-538 of October 27 2010); and
• the (now abolished) exclusivity system, under which only one collector operates on behalf of the Tyre Industrialist Association.

The 2016 waste management plan proposes the operation of multiple collectors in each region.

The board also analysed whether collectors’ marketing rights are restricted under the waste management plan. It found that collectors are deemed to have marketing rights if they can deliver waste products to the recovery facility of their choice and are deemed not to have marketing rights when they must deliver waste products to recovery facilities determined by a waste management system.

The board found that the marketing rights in question belonged to the Tyre Industrialist Association, as according to the information submitted in the scope of its exemption application, contractors cannot market products collected on the association’s behalf. The Tyre Industrialist Association claimed that this practice is essential in terms of its obligations towards the Ministry of Environment and Urbanisation.

Further, the board examined the Tyre Industrialist Association’s position in the relevant market and found that it was the only institution authorised by the ministry in this regard; however, other undertakings which are not members of the association are responsible for the collection, transportation, recovery and recycling of tyres.

Negative clearance and individual exemption analysis

Following its assessment of the association’s waste management plan, the Competition Board found that:

• the designation of recovery contribution shares by competitor undertakings is one of the factors that constitutes the price of tyres; and
• the revision of recovery contribution shares falls within the scope of Article 4 of Law 4054 on the Protection of Competition.

In addition, the board found that the Tyre Industrialist Association’s proposal to retain the marketing rights of worn-out tyres – which prevents collectors from choosing a recycling or recovery institution – would fall under the scope of Article 4 of Law 4054 and did not grant negative clearance in that regard.

Instead, the board determined whether the waste management plan could benefit from an individual exemption under Article 5 of Law 4054.

In order to be eligible for an individual exemption under the law, a restrictive agreement, practice or decision must:

• ensure new developments and improvements – including economic or technical developments – in the production or distribution of goods and the provision of services;
• provide consumers with a fair share of the resulting benefit; and
• not eliminate competition in a significant part of the relevant market.

This is not an alternative test and all conditions must be cumulatively met for an individual exemption to be issued.

The board determined that under the Tyre Industrialist Association’s proposal, the first condition had been met, as the collection of worn-out tyres promotes efficiency and reduces costs, which would enable the market to work more efficiently and thus enable new entries.

The board also found that the second condition had been met, as the collection of tyres separately by individual undertakings was not desirable due to the economies of scale and fixed costs. The establishment of independent waste management systems by each manufacturer would result in consecutive investments in the relevant sector, where fixed costs are prominent. In addition, as stated in Article 5 of the Worn-out Tyre Control Regulation, used tyres cause environmental pollution and damage which threatens human health and collecting them in the fastest manner possible is thus of utmost importance.

As regards the third condition, the board stated that tyre producers and exporters which are not Tyre Industrialist Association members must fulfil their obligations under the Worn-out Tyre Control Regulation themselves or through other collectors. In addition, agreements between collectors and the Tyre Industrialist Association do not include exclusivity clauses in the  association’s favour, which means that collectors may:

• work with undertakings other than the association;
• participate in tenders; and
• operate in different regions.

Having considered the association’s indicated aim to fulfil its obligations under the Worn-out Tyre Control Regulation and the fact that its members must determine tyre prices on their own and not exchange this information with the association or its members at any stage, the board determined that the association’s proposal would not eliminate competition in a significant part of the relevant market. In this respect, the board found that the agreement further satisfied the third condition of Article 5 of Law 4054.

Finally, the board found that the fourth condition had been met, as when the responses obtained from market undertakings were evaluated, it was found that:

• the practice of assigning used tyres by tender is convenient in terms of establishing a competitive market structure; and
• undertakings are not obliged to deliver used tyres exclusively to the Tyre Industrialist

Association under its Waste Management Plan.

Therefore, the board decided that the association’s proposal would not limit competition in a manner which would violate Article 5(i) and (ii) of Law 4054.

In light of the above, the board granted an individual five-year exemption to the Tyre Industrialist Association for its waste management plan.

(First published in International Law Office on November 16, 2017)

By Gonenc Gurkaynak, Managing Partner, ELIG, Attorneys-at-Law

The Regulation on Erasure, Destruction or Anonymization of Personal Data (“Regulation”) is published on the Official Gazette of October 28, 2017 and will enter into force as of January 1, 2018.

Regulation has been issued based on Article 7 of the Law No. 6698 on Protection of Personal Data (“DPL”). The article stated that personal data shall be erased, destroyed or anonymized by the data controller ex officio or upon the demand of the data subject, in the event that the reasons for which it was processed are no longer valid but left the principles and procedures regarding erasure, destruction and anonymization of personal data to be determined by a regulation. The regulation was issued later then contemplated by the DPL, as the DPL provided that all regulations will be put into force by the Personal Data Protection Authority (“Authority”) within a year as of publication of the law (i.e. until April 7, 2017). 

Regulation applies to data controllers which, by way of repeating the DPL, are defined as real persons or legal entities which set the objectives and means of processing personal data and are in charge of establishing and managing the data filing system (Article 4/1-I of the Regulation).

Regulation is essentially a brief legal text mainly consisting of two provisions on personal data storage and demolition policy (Section II, Articles 5 and 6 of the Regulation); and six provisions on the erasure, destruction and anonymization of personal data (Section III, Article 7-12 of the Regulation). 

II. Personal Data Storage and Demolition Policy 

Data controllers that are required to register with the data controller’s registry per DPL are obliged to prepare a personal data storage and demolition policy in accordance with their personal data inventory (Article 5/1 of the Regulation). It should be noted that DPL requires all data controllers to register with the relevant registry as a principle. That said the Authority is entitled to provide an exemption from this obligation based on objective criteria to be determined by the Personal Data Protection Board (“Board”), such as the nature and the number of the processed data, whether or not data processing is required by law or whether or not data will be transferred to third parties (Article 16/2 of DPL). Therefore, an exemption from the obligation to register means an exemption from the obligation to prepare a storage and demolition policy.

The Regulation also makes clear that neither preparing a personal data storage and demolition policy nor being exempt from preparing such policy, affects data controllers’ obligation to comply with the principles, requirements and obligations set forth in the regulation (Article 5/2 & 5/3 of the Regulation). 

According to Article 6 of Regulation, a personal data storage and demolition policy shall at least include the following:

a) Purpose of preparing the personal data storage and demolition policy,

b) Filing mediums regulated under the personal data storage and demolition policy,

c) Definitions of legal and technical terms mentioned in the personal data storage and demolition policy,

d) Explanations regarding legal, technical or other reasons that require storage or demolition of personal data,

e) Technical and administrative measures taken in order to store personal data safely, and prevent personal data from being illegally processed and accessed, 

f) Technical and administrative measures taken in order to demolish personal data in compliance with the law, 

g) Titles, departments and job descriptions of those taking part in the personal data storage and demolition processes, 

h) Table displaying the personal data storage and demolition periods,

i) Time periods of periodic demolitions.

j) Changes made in the existing personal data storage and demolition policy.

III. Erasure, Destruction and Anonymization of Personal Data

In terms of data controllers’ erasure, destruction and anonymization responsibilities, Regulation refers to conditions, principles and procedures set forth in DPL, other related legislation and the relevant data controller’s own policy on the matter and states that data controllers are obliged to comply with the foregoing.

(i) General

Data controllers are obliged to register and keep records of all transactions relating to erasure, destruction and anonymization of personal data at least for three (3) years (Article 7/3 of the Regulation). Moreover, data controllers are also required to disclose the methods they apply in relation to these processes in their policies and procedures (Article 7/4 of the Regulation). The method can be chosen by the data controller freely, in cases of ex officio erasure, destruction or anonymization of personal data, if Board did not decide otherwise on the matter. If erasure, destruction or anonymization is conducted upon request of the data subject, data controller should explain the reason behind choosing the relevant method as well (Article 7/5 of the Regulation).

(ii) Erasure

Erasure of personal data means the operation of rendering the relevant personal data inaccessible and non-reusable in any way for the relevant users (Article 8/1 of the Regulation). Relevant users are those who process personal data in accordance with the authority and the instructions given by the data controller or within data controller’s organization except persons or units responsible for technical storage, protection and backing up of data (Article 4/1-b of the Regulation).

(iii) Destruction

Destruction of personal data means the operation of rendering the relevant personal data inaccessible, irrecoverable and non-reusable in any way for everyone (Article 9/1 of the Regulation). Therefore, while erasure only affects the relevant data controller and relevant users thereof, in cases of destruction everyone is affected by the process and the relevant data becomes unavailable for use by everyone.

(iv) Anonymization

Anonymization of personal data is rendering personal data anonymous in such a way that it cannot be related to an identified or identifiable real person in any way even through matching that to another data (Article 10/1). According to Regulation, personal data is anonymous, if it cannot be related to an identified or identifiable real person by the data controller, recipient or recipient groups through techniques appropriate in terms of the filing medium and the relevant area of activity such as recovery and matching the data with other data (Article 10/2 of the Regulation).

(v) Time Periods

In terms of data controllers which have personal data storage and demolition policies, personal data shall be erased, destructed or anonymized during the first periodic demolition operation following the date on which such obligation arises (Article 11/1 of the Regulation). The data controllers are free to determine demolition periods. However, this time period may not exceed six (6) months. If the data controller does not have such policy, the obligation should be fulfilled within three (3) months of the date on which the obligation arises. These time limits were determined in the draft of Regulation as ninety (90) days and thirty (30) days, respectively. Board is authorized to shorten this time periods if there may be irrevocable damages or damages that are hard or impossible to recover and there is an obvious violation of laws.

(vi) Data Subject’ Request

In terms of data subjects’ demands for erasure and destruction, Regulation requires data controllers to decide within thirty (30) days and inform the data subjects regardless of the outcome of their requests (Article 12 of the Regulation). Additionally, if personal data is transferred to third parties, data controllers are also obliged to inform third parties of the requests and ensure third parties’ compliance with data subjects’ request. If all of the conditions for personal data processing are not eliminated, data controller is entitled to reject a request by explaining its reasons and the data subject should be notified of the rejection within 30 days at the latest in writing or in the electronic environment.

IV. Conclusion

Regulation certainly brings more specific and clear instructions and obligations regarding erasure, destruction and anonymization of personal data considering the general frame provided by the DPL. However, one might still argue that Regulation took it too far in terms of providing specific restrictions and obligations to the point where data controllers are left with a narrow range of flexibility to determine their own procedures and measures particular to their needs. Considering the speed of technological developments and change in everyday business activities in connection with these developments, adopting an approach based on principles rather than determination of specific limitations applicable all data controllers regardless of the nature of their activities and sector might be of importance for the effective enforcement of the Regulation.

(First published in Mondaq on November 8, 2017)

By Gonenc Gurkaynak, Managing Partner, Ilay Yılmaz, Partner, Burak Yesilaltay, Associate, ELIG, Attorneys-at-Law

“Parallel proceedings” are disputes between the same and/or related parties in the same or related disputes in different forums. Parallel proceedings usually arise when court and arbitration proceedings are commenced simultaneously to resolve the same case or a case that will in some way affect the other. Disputes arising out of shareholders’ agreements and articles of association, in particular, come under the spotlight in Turkey in the context of parallel proceedings.

A shareholders’ agreement is executed by the shareholders of a company to regulating the relationship between themselves and, indirectly, the company itself. It is subject to the principle of freedom of contract, and parties enjoy a fairly wide range of autonomy with regard to the contents of the agreement. Parties tend to use the same or similar content in the articles of association of a company as well. However, as the provisions of a shareholders’ agreement have a contractual nature, their breach may also have an effect at the corporate level, especially considering that shareholders’ agreements and articles of association have the same or similar provisions. This situation inevitably leads to parallel proceedings, which will, of course, complicate and aggravate the dispute and slow down its final resolution. It will also have a direct effect on the financial resources and time of the parties, because they have to contend on many different fronts. 

Furthermore, disputes arising out of cross-border deals may extend to different jurisdictions. In many cases, parallel proceedings lead to conflicting judgments/awards being given on the same set of facts, which risks rendering the whole process meaningless. In this point, arbitrators should understand the needs of the parties. Arbitrators have a duty to apply the provisions of the shareholders’ agreement and to render a “meaningful” award. If the parties have set forth in the shareholders’ agreement how they will exercise their rights arising from the law, arbitrators should respect their intention and decide that contractual provisions should prevail over the provisions of the law. Otherwise, contracts would remain pieces of paper with no effect – making the famous “creation of a new legal world” impossible. Therefore, arbitrators are in a sense “obliged” to protect what their fellow lawyers have created. In other words, even where rights are granted by law, the parties have the freedom to determine whether to exercise them or not. If the parties have agreed in the shareholders’ agreement that they will exercise rights in a certain way, arbitrators should respect their choice, as any act against the shareholders’ agreement would constitute a breach of contract. Therefore, arbitrators should not allow either party to hide behind the provisions of the law to torpedo the arbitration proceedings. 

In order to avoid such situations, parties may benefit from an “anti-suit injunction” – an interim measure that restrains a party from commencing or pursuing court proceedings. For instance, a party may argue that it is entitled to commence a lawsuit before state courts by rights arising from the Turkish Commercial Code or other applicable regulations. The arbitral tribunal may, nonetheless, grant an anti-suit injunction, if the exercise of the right being cited would breach the shareholders’ agreement in which parties have agreed to settle their disputes through arbitration. However, such injunctions are still controversial in Turkey, as in many other jurisdictions. 

In today’s legal order, it seems impossible to completely avoid parallel proceedings, especially in shareholder disputes. However, their occurrence may be prevented as early as the time the shareholders’ agreement and the articles of association of a company are drafted. The arbitration clause should also be worded in a plain and straightforward manner. Nevertheless, even lawyers with accomplished drafting skills may not be able to prevent parallel proceedings from being initiated entirely.

If the occurrence of parallel proceedings is inevitable, the next step should be to consider the options for challenges and pleas as to the jurisdiction of the unwelcome forum. Given that these challenges and pleas may still not prevent the occurrence of parallel proceedings, parties should also learn to live with them, when the occasion warrants. Just remember The Matrix, a movie in which what happens in the “virtual world” influences the “real world” – and vice versa. Parallel proceedings are no different, as the legal platforms where the battles are fought inevitably affect each other. In this regard, strong expertise across a wide range of jurisdictions, extensive knowledge both of M&A transactions and dispute resolution proceedings, and experience in the process are vital, as the parties should take care to assess carefully the results that may arise in the other forum.

By Ismail Esin, Managing Partner, Ali Selim Demirel, Senior Associate, Yigitcan Bozoglu, Associate, Esin Attorney Partnership

This Article was originally published in Issue 4.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

1. A search for safe and confidential payment instrument; Cryptocurrency 

1.1. Why? What is wrong with money as we know it?

The move from bartering to money took not even many years, but even period of revolutions. Since the Lydians, money has been managed by institutions called the States, a man-made abstract institution, where everyone accepts their existence. At the present, virtual and crypto currencies are quickly swooping into the markets to replace “traditional money”.

Why cryptocurrencies are moving at such a high pace since their very first foundation in 2009, namely Bitcoin, is actually a natural question struggles most of us since then. In brief, most basic reasons are fees and bureaucracies of intermediary institutions, and surely the security issues, but is that really all?

In case of disintermediation of the traditional model, transactions will be conducted free of charge within just a few minutes which creates a great advantage. Apart from that, it is alleged that security advantages are countless. From its decentralized characteristic, unlike as it is in institutional banks, governments are not able to seize them practically. Moreover, if a Bitcoin account holder does not eager to disclose its all payment information, there are many ways to make the transactions anonymous and the account uncrackable. Last but not least; unlike the credit cards, account information that is required to perform the transaction is not totally disclosed to the others, so the intermediaries, traders and other third parties are not practically allowed to learn or manage your account details and conduct any fraudulent action.

1.2. How it actually works and what’s its initial effects will be?

Existing Cryptocurrencies such as Bitcoin or Ethereum runs on the Blockchain, which is a technology having many applications and considered as the new disruptive revolution in digital world, but in recent years made its boom through Cryptocurrencies. Blockchain on Cryptocurrencies are decentralized ledgers that contains all the crypto transactions and verified by the computers called miners, sort of a group of public ledgers who are rewarded in Bitcoins in exchange of their services. In brief, block or technically “Node” stands for a processed Crypto code, where the Chain stands for the digital network. For the newcomers, all these miners etc. may sound like a science fiction movie storyline but it’s not. Yet we also advise you to watch at least the groundbreaking tv series titled Mr. Robot, if it suits your interest of course. 

It is crystal clear that Cryptocurrency will affect traditional money, in other words, fiat money, adversely if it keeps growing at this rate.  Regulated financial bodies will be affected from this disruptive revolutionary technology, in case they do not take the necessary steps to make this technology available within their provided services or regulate its flow somehow.

2. The rise of Cryptocurrency and Brave New World! 

As it was expected, the significant rise of Bitcoin and the other alternative coins, called Altcoins such as Ethereum, Litecoin etc. ignites the global financial giants and encourage them to invest, or at least not to ignore the potential gains tendered by Cryptocurrencies. However, existed cryptocurrencies and regulated financial establishments are serving at cross purposes and many expected rivals already started a war against Cryptocurrencies even including their law firms with their articles on blockchain. Thus, financial establishments nowadays aim to create new type of Cryptocurrencies that would provide both security and scalability at the same time which may also preserve their upper hand against Brave New Crypto World. We are currently witnessing such approaches especially from money management units of technology leader countries. 

It’s not all roses of course, there are several potential risks surrounding Cryptocurrencies which are mostly known as a matter of public; money laundering, terrorist financing, unpredictability, excessive volatility, and the presumptive loss of established financial players. Despite the rapidly increasing value of cryptocurrency, unlike the fiat currencies, it has (yet) no guarantee for being able to exchange to a real-value in the future since its power derives from a decentralized public ledger technology (“DLT”). Still, in case the rise of cryptocurrencies continues, supervisory charge in global financial market of central banks will be adversely affected. In this regard, we will no doubt face with different approaches and developments concerning Bitcoin in the near future in an increasing pace and variety. 

Apart from the above risks, Cryptocurrency may give rise to various other legal risks in terms of peer-to-peer transactions. A new group of troubles, some of which are cyber security issues, and the chargebacks for wrong payments may rise. While using traditional money transfer methods, there are ways to chargeback your money that has been wrongly transferred. However, chargeback methods are not available until such regulations and technical requirements adapted. To overcome the risks which may arise from the lack of explicit legal solutions, users may and usually use digital wallets offering to buy numerous types of Cryptocurrencies within a reasonable duration while claiming to have sufficient cyber security measures implemented.

3. Are we legally ready for the expected effects of Cryptocurrency, especially the disruptive and unexpected ones?

3.1. Current Status in Major Jurisdictions at a Glance

3.1.1. Turkey

Although Turkish legislations still remain silent regarding Cryptocurrency, there are some opinions and ideas stated by several governmental institutions which at least shows that there may be a development in that regard in the future. 

According to current legislations, companies that seek to operate electronic payment system business in Turkey have to act in compliance with the Law No. 6493¹ which regulates the electronic payment intermediaries and related services. However, existing Cryptocurrencies do not carry the requirements for being included in the scope of this Law. No. 6493, and thus Law No. 6493 is actually not applicable to Cryptocurrencies and their service providers which was also made clear by Banking Regulation and Supervision Agency (“BRSA”) in one of their nonbinding public statements. 

Other governmental organizations also announce their opinions on the topic such as Capital Markets Board of Turkey (“CMB”) which expressed their positive approach on Bitcoin and other Cryptocurrencies by stating that; Bitcoin is safe and could become very important and disruptive in the near future.

The Central Bank of the Republic of Turkey (“CBRT”) is also planning to research the characteristics of Cryptocurrencies with the collaboration of BRSA, CMB and Undersecretariat of Treasury which clearly shows that CBRT is certainly not ignoring the reality of Cryptocurrency and Blockchain technology. 

3.1.2. European Union

Until very recently, there is a clear disagreement within EU where policy makers refuse to mandate any supplementary rule and have decided to wait for the European Parliament, to take a step in this direction while all related institutions are having the same common opinion, which was building upon the idea that Cryptocurrencies are in fact not a substitute for fiat money, but can be deemed as an alternative payment instrument. 

On September 13, 2017, the European Parliament came up with a new proposal allowing Cryptocurrencies regulated by EU Member States in terms of combating fraud and counterfeiting of non-cash means of payment. EU Parliament defines virtual currency, as we say the Cryptocurrency, as a digital representation of value that is neither issued by a central bank or a public authority, nor necessarily attached to a fiat currency, but is accepted by natural or legal persons as a means of payment and can be transferred, stored or traded electronically. 

Proposed directive aims to regulate the cryptocurrency in its 5th Article by allowing Member States to intervene the unlawful gains or punishable criminal offences in which crypto currencies are involved. It has also required Member States to ensure that intermediary Cryptocurrency exchanging or service platforms must be licensed or registered before relevant authorities. similar to the system already built in New York under Bitlicense explained below. Therefore, with the adoption of this directive, EU Member States would be able to regulate Bitcoin in direction with their own needs and policies but it remains a big question mark whether already aggrieved bitcoin traders would be entitled to bring their claims before EU courts or not. Even some of the EU Member States have already granted licenses to Cryptocurrency intermediaries, like in Luxembourg; abovementioned proposal might be a huge step in terms of regulating all service providers with this regard.

3.1.3. Asia

Most of the countries that prohibited the usage of Cryptocurrencies are located in Asia; Bangladesh, Kyrgyzstan, and partly China. Although China has not adapted a mandatory rule on prohibiting Cryptocurrency, central bank of China, namely The People’s Bank of China (“PBoC”) has recently outlawed the Initial Coin Offerings²  (“ICO”)With ICOs, entrepreneurs offer new type of Cryptocurrency and publish its features on a Whitepaper, and people who seek to obtain it before the release day should buy tokens in exchange. Furthermore, PBoC has banned all other activities of such ICOs, but not limited to just issuing new digital coins; which give rise to a sharp fall in Bitcoin values in a short span of time at first although it has successfully regained its value, which again clearly demonstrates the strengthened status of the Cryptocurrency market even in China which is one of the primary giants of the market. Still, despite the foregoing, China still shows desire to adapt and take a role in Blockchain game since the Ministry of Industry and Information Technology established a Blockchain Research Institute.

As a bold exception to Asia, Malaysia’s government clearly stated that they will not ban Cryptocurrencies, but instead will regulate the market later this year while Japan, as a major driver of most of the Cyber-related topics, is working closely to catch the virtual currency market train. Japanese banks, unsurprisingly in line with their national policy, seek to create a new and authentic form of Cryptocurrency that would also secure the main qualities of regular Cryptocurrencies, namely, J Coin.

3.1.4. United States of America

As expected, legal practice related to cryptocurrencies revived and evolved in USA, but the federal government still has not adapted a federal law in this regard while some several states have introduced their own regulations. In some states, even the Blockchain has started to be accepted as a proof of transactions. Moreover, in Delaware, the best-known US state especially by foreigners since it is a safe haven for commercial activities, enables maintaining all corporate documents, shareholder lists and other corporate records, using the Blockchain technology which is for sure an important step towards the future.

At the same time, illegal usage of cryptocurrencies has manifested itself early in US with Silkroad case, which was briefly an online grey market for illegal transactions and revealed the usage of Bitcoins in criminal transactions. It should be pointed out that, grey market is actually a legal concept but unfortunately can be easily associated with illegal transactions due to lack of audit or control mechanism, so it exposes legal risks naturally. 

Following numerous activities and cases across US, many states have approached to regulate Cryptocurrency market where in 2015, New York Department of Financial Services issued their first virtual currency license. Even though licensing cryptocurrency services is troublesome since it’s a complete digital process, instead of a messy money transmitting market, it should have deemed better than a nothing, at least for now. Now, virtual currency intermediaries are able to engage in industry by obtaining Virtual Currency License (also known as BitLicense) from New York State Department of Financial Services. Moreover, US Congress still demonstrates their close interest to the topic where it was proposed that the transactions of such virtual currencies under $ 600 should not be subject to tax and further developments will surely follow that in near future. 

3.1.5. Other developments

Foregoing developments are not the only developments of course and there are many other countries paying great attention to Cryptocurrency. Some of the Swiss municipalities accepted Bitcoin as a payment method for tax duties and installed Bitcoin ATMs across their districts, UK authorities published a paper that approaches Cryptocurrencies positively in respect of economic growth, while Russian law-makers stated that a Cryptocurrency Law will be passed by the end of the fall 2017. These developments suffice to prove that Cryptocurrency revolution is already started and will take a great place in future financial eco-system, and it may happen sooner than expected regardless of counter opinions or lobbies against the winds of change. 

4. A New Type of Contract in Legal World? “Smart” Contracts

Blockchain, since it is a distributed ledger technology, might have countless of use cases. In the meantime, it has inevitably started to create new dimensions in legal world. Smart contracts are not actually contracts; they are pure codes that works on “if-then” concept with using Blockchain and Cryptocurrency, with use cases like real estate or government services. Within this concept, one who seek to be provided with services should pay with a Cryptocurrency and, in exchange, the service provider should give the required digital key or digital code according to the Smart contract. If one party fails to perform its “digital” obligation, the Cryptocurrency will be refunded or the digital key will be expired. For now, one who wants to conclude such contracts should use an Ethereum, since only it has the requisite Smart contract capabilities. Although the implementation of this topic is considered within a very narrow scope, we may face with many other implications in near future.

5. What is next? Is this the end of Money?

Although it is not possible to foresee even short-term developments in financial markets, it is undisputed that laws and legal practice always adapt itself to evolving world. How will such adaptation come to light will be revealed very shortly in our opinion and governments and authorities will definitely regulate the Cryptocurrency market in one way or another and Turkey also will most probably take EU system as a model similar to cyber security strategy adapted in 2016 which was based on Cybersecurity Strategy of the European Union adapted in 2013 by the European Commission.

At first, in terms of money laundering, the international regulation societies should incorporate a new establishment that will supervene and secure but not adversely mandate the Cryptocurrency market. Cyber security is the real question at this point, thus the authorities should take this idea into serious consideration.

Furthermore, since banks are the major players of financial market, they should at least implement new consumer and trade friendly approaches adapted to Blockchain technology or cryptocurrency flow to avoid the possible global legal struggles of the famous grey market, 

Besides these, Bitcoin wallets and other Cryptocurrency intermediary service providers could be licensed under what would authorities need at a minimum requirement level to avoid the outcomes of strict regulations which will lead to a sharp increase grey market areas 

Cryptocurrency followers are waiting for the above-mentioned EU regulations and other major jurisdiction’s approaches to reach to fruition in order to foresee developments ahead. Not a single day goes by without noticing a headline or news regarding new approaches and regulations on Cryptocurrencies and thus one who seeks to get in to this brave new world or at least keep up with the already-arrived future should closely follow the day-to-day economic and legal developments in this regard.

1. Law on Payment and Security Settlement Systems, Payment Services and Electronic Money Institutions. Turkish version: http://www.mevzuat.gov.tr/MevzuatMetin/1.5.6493.pdf English version published by Banking Regulation and Supervision Agency: https://www.bddk.org.tr/websitesi/english/Legislation/129166493kanun_ing.pdf 

2. ICO is a process of offering new type of Cryptocurrencies, which can be considered as a mixture of initial public offering and Crowdfunding and the most popular ICO is the one which was performed by Ethereum.

By Efe Kınıkoglu, Partner, Moral Law Firm